SuperMedia: Turnaround Play

A New York presenter recommends SuperMedia (NASDAQ: SPMD, $39.40). This publisher of directories just emerged from bankruptcy in January, with a debt load reduced from close to $10 billion to $2.75 billion. Management's much more focused strategy and improving economy make this an attractive turnaround story. The company's unique guarantee program differentiates SPMD from competiton. Strong online presence, growth in direct mail, and opportunities in mobile applications should help mitigate negative trends in print directories. The upside is 100%+, based on comparison to DEXO, a major competitor, which has also gone through bankruptcy.

Tatum/Roulston Report

The pundits just can’t get enough economic data to make their point. Wall Street economists can’t help but compare the current recovery to the past. It just seems they can’t be talking to the same companies, bankers and consumers we see in our travels around the country and the Tatum Survey is hearing every month. As we have said recessions are economic while depressions are emotional. The credit meltdown has had a lasting emotional impact unlike anything we have seen in the last 50 years. Savings, retirements and a good degree of confidence was lost and not soon to be replaced. Political and credit signals are creating ongoing uncertainty and this month in the Tatum Survey, we see that maybe unemployment is slowing but overall employment is not growing. Uncertainty is reflected in sloppy backlogs, capital expenditures and to some extent credit availability.

There is a leaderless funk that is concerning in its breadth. Business has reached a bottom and rebounded to a plateau where business after business we talk to compares to the levels they saw 3-5 years ago with little sign of visibility. There are businesses in isolated segments that are growing and some even thriving with catalysts in technology and health care spending to go along with government stimulus. We are not naysayers, but reality is that consumers are weighing the issues of credit and debt much differently than the last 20 years. Common sense tells us as we look at the state of commercial and consumer mortgages that banks are not likely soon to change their flexibility and generosity. Politicians are entering their “season”, so rhetoric is bound to rise. Our view is the market has pockets of opportunity for good managers. In general valuations reflect sluggish growth. Selectivity, accountability, transparency and diversification are our focus in 2010.

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Live Nation: Attractive Following Merger with Ticketmaster

A NY presenter likes Live Nation Entertainment (NYSE: LYV, $13.41). The company finalized its merger with Ticketmaster in late January and is now a fully integrated entertainment services platform. Management was conservative with its guidance for cost synergies from the deal and there could be significant upside to company's projections, beginning in 2011. Sponsorships and new ticketing schemes designed to cut out the secondary market for tickets, represent significant incremental revenue opportunities. The presenter targets a 20% upside, but stresses that his estimates don't include potential top-line synergies. The stock is only followed by two analysts currently.

GrafTech International: Strong Postion in Oligopolistic Industry

Our NY presenter recommended GrafTech International (NYSE: GTI, $13.15). This producer of graphite electrodes has the leading share in an industry, where top 5 players command 65% of the market. GTI has the strongest manufacturing network of all competitors with only one other player having true global presence. The company has locked in supply of needle coke, the raw material essential in manufacturing of GE's. As demand recovers, GrafTech should be able to return to pre-crisis operating rate levels. Leverage in the business model will translate into significant incremental EBIT. The upside is 50%+. The company has paid down debt and has liquidity available to finance expansion.

Roulston Research's Consumer Chair's Thoughts On Spending in the Home Improvement Sector

“The news from Ethan Allen and Haverty this week reinforces everything the sector has seen in the last few months, as furniture sales picked up just after Christmas and big-ticket home projects increased in January when home-improvement retailers started seeing increases in estimates for kitchen and bath projects,” Craig Johnson, President of Customer Growth Partners, and Roulston's Consumer Community Chairman, said in an interview with Dow Jones.

“Housing market turnover, which is starting to pick up, is driving increased sales at furniture and home-improvement companies, he said. People generally spruce up their homes either when they’re about to put them on the market or when they’ve just moved into a new house.”

“Spending on home improvement and furnishings is improving despite 10% unemployment shows people with full-time jobs are starting to spend again, and since consumer spending makes up 70% of the economy and retail accounts for 45% of consumer spending, that has implications for the broader economy as well,” Johnson added

Consumer roundtable with Alan Lacy former CEO of Sears

talked about trends in retail where Alan feels unemployment may be affected by labor hiring instead of capital spending due to the uncertainty of the economy. Other issues in retail emphasized including a continued movement of private label share growth and distribution impact caused by this, as many products will have new channels available via quality and price level differentiation. On Consumer staples and Consumer discretionary products in general he is bullish, as home improvement and automotive cycles he believes can not be deferred much longer for replacement goods, but also because appliance makers in particular have been somewhat successful in creating proactive purchasing driven by water and energy savings and improvements in cleaning capabilities in particular for laundry appliances. In the interest of conservation, there is an offset to the change of behavior with debt use by the consumer.
Lot of discussion with Sears, Kohls, JC Penney and other names in space. Call me for insight and detail. Kmart generating cash while Sears living off legacy and cost cutting changes. I can give you more details and will write more on this.

Member of Obama's Transition Team on Healthcare Reform

Mark Lindsay, Director of The Livingston Group's healthcare practice, former senior advisor to Bill Clinton and member of Obama's transition team, shared his thoughts on the current state of the healthcare debate. Mark still believes, as he stated in our recent healthcare roundtable, that the reform has no chance of getting passed, even via the reconciliation route. In his view, the summit at the White House last week was a political exercise, spurred by premium hikes in California. It's very difficult to scale the current bill back due to the nature of the innerworkings of Congress.